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How a life-saving device turned into a PR nightmare for one pharma firm

Drugs manufacturer Mylan jabbed itself in the foot when it bumped up the price of the EpiPen.

THE BATTLE BETWEEN priced-out patients and the pharma industry flared yet again in recent weeks when generic drugs maker Mylan found itself at the centre of a PR nightmare for jacking up the price on a single product.

The company, headed up by Heather Bresch and based in the Netherlands, pushed the US public’s patience to boiling point after a final hike in costs for the EpiPen, an easy-to-use device for treating severe allergic reactions.

Now selling for $600 for a two-pack, the price in the USA has increased 400% since Mylan bought the product’s patent nine years ago.

Faced with a tsunami of criticism, the pharma firm announced on Monday that it would go into competition with itself by launching a generic version of its own drug for half the cost of the branded version – although still a fair bit above the 2008 price of around $50 per pen.

The move did little to stabilise the situation, especially as analysts noted that the generic product would “only modestly” impact Mylan’s revenue. Critics wrote it off as little more than a PR exercise.

Shares in the company dropped more than 10% in the three days after the issue surfaced on the US presidential campaign trail, with Democratic nominee Hilary Clinton joining the chorus of politicians and celebrities who have criticised Mylan’s actions.

While the company scrambles to salvage its reputation and reassure shareholders, let’s look at how Mylan grew to dominate the allergy drugs market and has got away with a string of price increases to date.

Go-to drug

Mylan – which operates facilities in Dublin and Galway – acquired the patent for the decades-old EpiPen in 2007 as part of its takeover of Merck’s generic drugs division for $6.7 billion.

The EpiPen has always been used as a life-saving treatment, but it didn’t become a mainstream drug until recent years.

18/4/2012. Mylan Jobs Announcements Enda Kenny with Mylan's Robert J Coury and Heather Bresch Source: Rollingnews.ie

Around the time of the Merck Generics buyout, the EpiPen generated less than $200 million in sales – not an enormous figure in pharmaceutical terms. Mylan was on the brink of culling the device.

However less than 10 years later, Mylan had managed to turn the EpiPen into a $1 billion-a-year money-spinner that accounted for 40% of the company’s operating profits.

Pundits attribute the major turnaround to a successful marketing and legislative campaign that played on public anxiety. The campaign was initiated by Bresch in her role as then-president before she became chief executive of the firm in 2012.

Mylan boosted the brand name by handing out free EpiPens to almost 60,000 schools across the US after it successfully lobbied for legislation that required the institutions to stock epinephrine, or anti-allergic, devices.

It also pushed for the FDA to change labeling rules so it could market the device to anyone at risk of an allergic reaction, rather than just people who had previously experienced anaphylactic shock.

The company also signed a partnership with Disney to stock the pens at its theme parks and cruise ships, and it has spent tens of millions of dollars on TV ads.

These moves, coupled with a rise in childhood allergies, encouraged concerned parents to stock up.

Anecdotal evidence showed that many families bought the drug multiple times in order to have it readily on hand in various locations. The manufacturer eventually started selling the EpiPen as a twin-pack-only buy.

The company has also benefited from the fact that epinephrine expires after a year, so stocks have to be replenished on a regular basis even if the device is left unused.

Schools Food Allergies EpiPens can only be bought as a two-pack Source: AP/Press Association Images

Rivals

The drug inside the device – epinephrine, or adrenaline as it is commonly known – was already generic when Mylan acquired the EpiPen.

The patent was for the injector itself, which can quickly deliver the right dosage when a patient is suffering a severe and potentially life-threatening allergic reaction.

The ability for patients to administer the correct amount of epinephrine themselves in a crisis situation has posed a challenge for companies developing rival products.

In 2013, the first serious competitor, the Auvi-Q, came on the market.

Fitted with audio instructions on how to administer the medicine – a technology that EpiPen doesn’t have – it was developed by Kaléo and marketed by French pharmaceutical company Sanofi.

However, in October last year, the US Food and Drug Administration (FDA) recalled the product over concerns of inaccurate dosage deliveries.

Mylan’s recent controversy has reignited Kaléo’s interest in refining the Auvi-Q, though it is not the only manufacturer looking to capitalise on its spectacular downfall.

Imprimis Pharmaceuticals – the company that created a cheaper alternative to Martin Shkreli’s overpriced Daraprim drug used to treat HIV-positive patients – is also taking the opportunity to push an EpiPen rival. So is Teva Pharmaceutical Industries, which has had its product launch delayed by the FDA.

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Price hike

Mylan didn’t announce a bombshell price increase à la Martin Shkreli, who achieved pantomime-villain status when he hiked prices for the 62-year-old Daraprim treatment roughly 5,000%. Instead, it gradually bumped up the price over a number of years as demand increased in a market with no major competitors.

Analysts correctly warned last year that there would eventually be a public backlash once prices reached breaking point.

However, CEO Bresch has maintained that the price hike isn’t Mylan’s fault. She has blamed it on the “inefficient” US healthcare system, which sees “four of five hands” touch the product before it makes it to the pharmacy counter.

The price hikes haven’t been replicated in most of Europe, or other countries, where drug prices are generally kept closely in check by government regulation.

Mylan maintains that its revenues on the EpiPen are diminished by cuts given to pharmacy benefit managers – which are third-party administrators of prescription drugs in the States – as well as insurers, retailers and wholesalers. It says out of the $608 listed price, Mylan makes around $274 per two-pack.

Discount?

The move to offer a discounted generic version has done little to appease critics. Why? Mainly because analysts have already said it will make little difference to the consumer.

Forbes reports that there is already a discount available through a coupon programme, which reduces the branded version to $300 per pack.

The same coupon discount won’t be available for the generic version, so some patients will end up spending the exact same price for both products, which are identical because the generic didn’t require FDA approval.

The magazine notes that Mylan will cut out the aforementioned “four or five hands” that take a piece of their EpiPen revenues by making the generic version available through a so-called “direct-ship programme” – so depending on shipping and manufacturing costs, the company could actually stand to make up to $26 more on the generic sales.

As the company prepares to launch the generic in the coming weeks, the controversy will roll on. For now, EpiPen remains a needle in Mylan’s thigh.

Written by Conor McMahon and posted on Fora.ie

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